4 Troubling Signs That Michael Kors Is Past Its Prime

A growing number of analysts and investors are turning sour on
the ubiquitous brand, citing uneasiness over increased promotions
and signs that Americans are losing interest in its signature
handbags, shoes and watches.

The company has been expanding rapidly and successfully chipping
away at rival Coach's market share for years. It now commands 18%
of the North American luxury handbag and accessories market — up
from 3% in 2009, according to
Wall Street Journal. During the same time period, Coach's
share of the market has fallen from 35% to 24%.

But Michael Kors' popularity, along with reports of increased
promotional activity, is corroding its image as an aspirational
brand,
analysts say.

Here are three particularly troubling signs for the brand:

1. The share of women
planning to buy a Michael Kors handbag over the next three months
has dropped to nearly half of what it was in the previous three
months, according to a survey by Baird Equity Research.

Note the findings below.

Baird Equity Research

2. U.S. Google search traffic for the brand has been flat
over the last couple weeks, following a deceleration in June,
according to Baird.

This chart shows the search traffic
trends:

Baird Equity Research

3. Michael Kors denies that it's running more promotions,
but several analysts have reported seeing more promotional
activity during store checks. Barclays and Citigroup
have both estimated that Kors is devoting twice as much store
space to discounts.

Barclays Capital analyst Joan Payson also recently noted that as
much as 15% of the brand’s online inventory was on sale compared
to zero sales the previous year.

4. Citigroup analyst Oliver Chen sees sales growth
beginning to decelerate. Based on a Citigroup survey,
Chen has predicted that Kors' June sales rose 7.8%, which is down
from 15.2% growth in April and 13.7% growth in May, CNBC reports.